Ten major U.S. banks have agreed in principle to pay $8.5 billion in cash and other assistance to borrowers to settle allegations of foreclosure improprieties brought by the Office of the Comptroller of the Currency and the U.S. Federal Reserve in 2011, the regulators said Monday.
The firms involved - Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo - will make $3.3 billion in direct payments to eligible borrowers and offer $5.2 billion in other assistance such as loan modifications and forgiveness of deficiency judgments, the regulators said.
The agreement covers more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010.
Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error.
As a result of the settlement, the participating servicers would cease the independent foreclosure review, which involved case-by-case reviews, and replace it with a broader framework allowing eligible borrowers to receive compensation significantly more quickly.
Monday's announcement comes nearly a year after the nation's five largest mortgage servicers agreed to a landmark $25 billion settlement with a coalition of state attorneys general and federal agencies.
Citigroup said Monday that it expects to record a pre-tax charge of about $305 million in the 2012 fourth quarter for its cash payment portion of the settlement. The company expects its about $500 million share of the loss mitigation or other foreclosure prevention actions in connection with the agreement will be covered by existing loan loss reserves.
Earlier Monday, Bank Of America said it has reached a $11.6 billion settlement with Fannie Mae (FNMA.OB), resolving some of the mortgage issues that have lingered since the financial crisis. Monday's settlement allows Bank of America to resolve agency mortgage repurchase claims on loans originated and sold directly to Fannie Mae over eight years between January 1, 2000 through December 31, 2008. The settlement will lead to charges taken against the company's 2012 fourth quarter earnings.
Bank Of America shares are currently trading at $12.01, down 10 cents, while Citigroup shares are trading at $42.18, down 25 cents and Wells Fargo shares are trading at $34.53, down 41 cents or 1.18%. JPMorgan shares are currently trading at $45.33, down 3 cents and U.S. Bancorp shares are trading at $32.88, down 34 cents or 1.01%.
by RTT Staff Writer
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